Commercial Activity Tax (CAT) - General Information
Taxpayers - The commercial activity tax (CAT) was enacted in House Bill 66, which was passed by the 126th General Assembly. The CAT first applies for taxable gross receipts received on and after July 1, 2005. The CAT is an annual privilege tax measured by gross receipts on business activities in this state. This tax applies to all types of businesses: e.g., retailers, service providers (such as lawyers, accountants, and doctors), manufacturers, and other types of businesses. The CAT also applies whether the business is located in this state or is located outside of this state if the taxpayer has enough business contacts with this state. The CAT applies to all entities regardless of form, (e.g., sole proprietorships, partnerships, LLCs, and all types of corporations). A person with taxable gross receipts of more than $150,000 per calendar year is subject to this tax, which requires such person to register with this department as a taxpayer. Please note that certain receipts are not taxable receipts, such as interest income. The tax does have limited exclusions for certain types of businesses, such as financial institutions, insurance companies and some public utilities if those businesses pay specific other Ohio taxes.
Taxable Gross Receipts - Gross receipts subject to CAT are broadly defined to include most business types of receipts from the sale of property or realized in the performance of a service. The following are some examples of receipts that are not subject to the CAT: interest (other than from installment sales), dividends, capital gains, wages reported on a W-2, or gifts. In general, for the sale of property, such receipt is only considered a taxable gross receipt if the property is delivered to a location in this state. For services, the receipt is sitused (sourced) to Ohio in the proportion that the purchaser's benefit in this state bears to the purchaser's benefit everywhere. The physical location where the purchaser ultimately uses or receives the benefit of what was purchased is paramount in making this determination. In other words, receipts from sales to out-of-state purchasers or the proportion of the services where the benefit is primarily received outside of this state are not subject to the CAT.
Registration - Taxpayers having over $150,000 in taxable gross receipts sitused to Ohio for the calendar year are required to file returns for the CAT. In order to file returns, a taxpayer must first register for CAT with the Department of Taxation. Registration is available electronically through the Ohio Business Gateway. Alternatively, taxpayers may register by submitting the CAT 1 registration form. The CAT 1 registration form is available through the Department's Web site at Tax Forms or may be requested by calling 1-800-282-1782.
Annual and Quarterly Filers - Annual CAT taxpayers (those taxpayers with taxable gross receipts between $150,000 and $1 million in a calendar year) must pay an annual minimum tax. Beginning in 2010, the annual minimum tax is due on May 10 of the current tax year and will be paid with the filing of the annual return. The annual return reports the taxable gross receipts for the prior year's activity and prepays the annual minimum tax for the current calendar year. R.C. 5751.07 was amended in the most recent budget bill to allow the Department to require annual CAT taxpayers to file and pay electronically for returns filed on or after Jan. 1, 2014. Taxpayers may file and pay electronically through the Ohio Business Gateway. Alternatively, annual taxpayers may utilize TeleFile as a means for filing and paying the annual CAT return electronically beginning in April 2014.
Taxpayers with annual taxable gross receipts in excess of $1 million must file and pay returns on a quarterly basis. Quarterly returns are required to be filed electronically through the Ohio Business Gateway. Quarterly taxpayers owe the annual minimum tax for receipts up to $1 million. In addition, quarterly taxpayers pay a rate component for taxable gross receipts in excess of $1 million. Beginning in 2010, the annual minimum tax is paid with the filing of the first quarter return, which is due on May 10. Prior to 2010, the annual minimum tax was paid as part of the fourth quarter return due on February 10.
Consolidated Elected Taxpayer Groups and Combined Taxpayer Groups - A consolidated elected taxpayer group is a taxpayer that has elected to file as a group including all entities that have either 50 percent or more common ownership or 80 percent or more common ownership. In addition, the group can elect to include or exclude non-U.S. entities with the same common ownership in the group. A major benefit of making this election is that receipts received between members of the group may be excluded from the taxable gross receipts of the group. However, taxpayers making this election must agree that all commonly owned entities are part of the group even if nexus does not exist. This election is binding for eight calendar quarters. If such election is not made, any taxpayers with common ownership of more than 50 percent must file as a combined taxpayer group. Combined taxpayer groups may not exclude receipts between members of the group; however, such groups need only include in the group those members that have nexus with Ohio.